Remember the catchphrase ‘Add it to my account‘? A phrase often used when you buy but pay the total monthly dues in one go at a later date.
The concept of maintaining a running account system with your local Kirana shop is as old as time itself. You would buy groceries and have the bill added to your account which you could clear at the end of the month. The simplicity of this transaction is something customers and merchants appreciate even today through BNPL.
Old-school Khaata gets digitized
With the advent of technology and penetration of the internet, modern-day tech-savvy millennials are leaning ever more towards convenience. They prefer simple solutions for their everyday needs. The Buy Now Pay Later (BNPL) system offers customers just that – convenience. Under this system, you are allowed to make purchases and accumulate your bills into one account. Thereupon, the consolidated bill amount is paid at one go – fortnightly or monthly – depending on the BNPL service that you use.
Thus, in simple terms, BNPL is the digitized version of maintaining a running account with merchants where you can make multiple transactions and then clear your dues at once. BNPL allows you to do one-touch transactions.
Before the emergence of the BNPL system, credit cards provided the same facility wherein you could pay for your purchases at a later date. But given its multifold benefits over credit cards, BNPL is fast gaining acceptance.
Here are some of the reasons why users are drawn to BNPL over credit cards:
a. Relaxed eligibility criteria
For availing a credit card you need to fulfil some eligibility parameters which include your income, credit history, credit score, etc. BNPL on the other hand, doesn’t mandate the disclosure of any historical financial information.
b. Free of cost
Credit cards often involve a joining fee and/or an annual fee. In the case of BNPL, the service is completely free of cost. There is no usage fee either. The only payment that you are required to make is the outstanding bill amount, failing to do which, a minuscule penalty is levied.
c. Ease of use
The elimination of disclosing any bank account details makes BNPL a safer and swifter option of payment as there is:
o No need for OTP
o No delay in the processing of refunds
o No or near-zero transaction failure
d. Consumer Empowerment
This is an important reason why BNPL is gaining the acceptance it has received – consumers feel empowered by the idea of being able to have what they want, in the now. Without the pressure of hidden charges or maintenance fees, having access to micro-credit can be life-changing; this pandemic has taught us just that with the increase in the number of users embracing BNPL.
BNPL platforms allow you one-tap purchases which are convenient, simple and, above all, easy. There are no hidden charges, unlike credit cards, and you can use the facility with complete transparency. Moreover, BNPL platforms are secured with security encryptions which keep your transactions safe from the possibility of cyberattacks.
There are few points to note though:
BNPL is not available to all
It must be noted that BNPL services are not available to all. The credit decisions in BNPL are done by machine intelligence with no human involvement at all. The selection of users takes place through complex algorithms processing 100s of features including the behaviour of the consumer on merchant platforms, etc. It is the system that selects you to avail of this service.
Credit Limit based on Spending Behaviour
Furthermore, the credit limit in the BNPL model is also allowed based on your spending behaviour. This is particularly helpful for individuals who have no credit history.
With the recent pandemic driving the use of digital payment platforms, the BNPL model is gradually becoming popular among masses. With the ease, security and affordability provided by this system of payment, you can easily avoid the hassle of multiple payments by consolidating them with one. In India, BNPL platforms have also tied-up with leading merchants making them relevant in today’s times when online transactions have become the norm.